SWEDEN Law and Practice Contributed by: Johannes Wårdman and Erik Frykenholt, CMS Wistrand
Swedish companies indirectly involved through JV supply chains. These developments raise important considerations for Swedish companies engaged in JVs. While the JV itself may or may not fall within the direct scope of new EU rules, the legal and reputational exposure of the JV partners is increasing. It is no longer sufficient to manage ESG risks within internal operations – com - pliance now extends to shared entities and external partners. Swedish JV participants should: • assess whether the JV meets the thresholds for CSRD or CSDDD obligations; • clarify which entity or partner bears responsibility for ESG reporting and due diligence; • allocate ESG risks explicitly in shareholder and JV agreements; and • align ESG governance frameworks, codes of conduct and grievance mechanisms across JV partners. 9. Exit Strategies and Termination 9.1 Termination of a JV The JV arrangement may come to an end in a multi - tude of ways which may be envisaged by the parties or due to disputes or poor performance of the JV. The JV participants usually have an exit strategy regulated in the JV agreement. A few common ways for a JV arrangement to come to an end are outlined below. • The intended purpose of the JV has been fulfilled and the JV participants agree to sell the JV through a trade sale or IPO. • One of the JV participants wishes to end the JV while the other participant(s) wishes to continue the business of the JV and redeems the shares. • A deadlock situation has occurred and has not been resolved. • The JV is liquidated by mutual decision between the JV participants. • The JV is compulsorily liquidated or enters into bankruptcy due to poor financial performance. The matters to be dealt with on termination of the JV depend on the aforesaid reasons for the termina -
tion. However, general issues typically arise, such as allocation of assets and consideration, settlement of debts and liabilities, allocation of IPRs and termination of employees and consultants. 9.2 Asset Redistribution and Transfers The JV participants are able to freely transfer assets to the JV by way of a shareholder contribution with - out any consideration from the JV; however, this is subject to tax considerations. If any assets are to be transferred from the JV to the JV participants there are a few issues to consider from a corporate law per - spective. If the JV, being a limited liability company, transfers assets to the JV participants without consideration or with a consideration below fair market value, this may be considered unlawful value transfer. In such cases, the transfer may be considered a distribution of divi - dends in kind and certain equity protection provisions shall be considered. A distribution of dividends may only be made if there is sufficient unrestricted equity in the JV to cover the value of the distribution and if the distribution is justifiable given the financial health of the JV. To avoid any disputes between the JV participants upon the termination of the JV it should be clear from the JV agreement whether or not the ownership of assets used in the JV will remain with a JV participant or if it will be owned by the JV. If the JV participants are unable to agree on the distribution of assets of the JV and the JV enters into liquidation, an independent liquidator will be responsible for liquidating the assets and distributing the proceeds to the participants pro rata to their ownership in the JV. 9.3 Exit Strategy A general principle of the Companies Act is that a shareholder or JV participant will have the right to freely transfer its shares but, at the same time, will not be obligated to transfer its shares. There are a few exceptions to this general principle ‒ for example, a majority shareholder holding at least 90% of all out - standing shares may initiate a compulsory buyout of the minority, and the minority shareholder may, con - versely, require the majority shareholder to purchase its shares.
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